President Joe Biden will end his term with a relatively healthy labor market as the United States added a whopping 256,000 jobs in December and the unemployment rate fell to 4.1%.
Both figures, reported Friday by the Bureau of Labor Statistics, compare favorably with historical averages and exceed Wall Street forecasts. Analysts polled by Dow Jones had expected only 155,000 jobs to be added in December, while the unemployment rate would remain unchanged at 4.2%.
In themselves, the latest figures indicate that the US economy has largely achieved the ‘soft landing’ scenario that Biden aimed for: relatively low unemployment and relatively low inflation.
Currently, layoffs remain moderate, although the pace of hiring has slowed significantly over the past year. And the new jobs being created are largely concentrated in healthcare, government and retail, while other sectors are at a standstill. That trend continued in December, with the BLS finding insignificant job growth in manufacturing, professional and business services, leisure and hospitality, and construction.
Despite the furor over bringing back blue-collar positions, manufacturers cut jobs in four of the past five months and ended the year with a net loss of 87,000 workers.
With 12.9 million workers, the US manufacturing sector is essentially the same size as it was at the start of the Covid pandemic.
Markets responded to Friday’s report by sending borrowing costs higher, with Wall Street traders now predicting just one rate cut by the Federal Reserve for all of 2025. Stocks fell, with the Dow Jones erasing gains after Donald Trump’s re-election.
Millions of voters opted to return Trump to the White House out of frustration with the Biden-era economy, especially because of consumer price increases that began soaring not long after he took office in 2021. Inflation has fallen sharply, but is still stubbornly hovering just above federal inflation. Reserve target of 2%.
These price pressures overshadowed a buoyant labor market and strong wage increases that increased the net purchasing power of many households. The unemployment rate fell to lows not seen in decades, adding hundreds of thousands of jobs in most months as the economy revived from the pandemic.
While wage increases on average largely kept pace with inflation and the stock market soared to new highs, higher costs left consumers feeling worse off psychologically, contributing to Democrats’ loss of the White House and Senate.
Forecasters expect employment to continue to rise in the future, albeit slowly, as economic activity remains steady and interest rates continue to decline in the wake of the Federal Reserve’s monetary easing.
The BLS even reported this week that job postings were ticked higher. ZipRecruiter chief economist Julia Pollak wrote that the data “points to the possibility of better news, with the potential for stronger hiring as 2025 gets underway.”
Openings for small businesses in particular have grown, Pollak says, which other surveys show is largely due to optimism about what the economy will look like under Trump.
Consumer credit data released this week also shows that U.S. borrowers are looking to pay down their debts after aggressive purchasing behavior. That could indicate slower spending, but the same data shows that lending for car purchases rose sharply in November, suggesting a more balanced view of consumer health.
S&P Global reported this week that the purchasing managers’ index of business confidence was at an 18-month high, with the employment component increasing for the first time in five months.
“There is a confluence of factors that will cause the labor market to stabilize and possibly even warm up a bit,” said Guy Berger, director of economic research at the Burning Glass Institute.
This article was originally published on NBCNews.com
